How I Purchased My First House Upon Graduation

Today I am going to tell you my story of purchasing my first house upon finishing graduate school. To be precisely, I purchased my first house about four months after graduating and starting my first job. But the money I used for the down payment was not from my new earnings. Every penny of it was saved during graduate school, from my stipend as a teaching/research assistant.

In graduate school, there are always opportunities to be a teaching or research assistant. When one gets such position, they were also offered discounted or completely free tuition. I finished my entire graduate school without paying a penny by myself. However, the amount of the money that actually comes to one’s back account as monthly stipend was actually small, barely enough depending on your lifestyle. My stipend fluctuated around $1500 per month. And yes, this was my total monthly income while in graduate school.

You may wonder how I managed to save for a housing down payment with such tiny income. Below is an itemized expenses when I was in graduate school:

Rent: $500

Utility: $50

Grocery: $300

Transportation: $60

Miscellaneous: $100

Total: $1010

         

To clarify, all the above numbers were average cost. My rent was rarely higher than 500 because I always shared an apartment with others. Most of the time I lived in two bedroom or three bedroom apartments, so it was not overly crowded. I might be able to save even more if I chose to live at somebody’s basement, or share with four or five roommates, but that would make my living environment less comfortable. As a tiny female, I preferred to live with others as compared to living alone. I felt safer and livelier. Our utility bill was always low because most of us spent most of our time on campus. For transportation, I took buses and the cost to get a monthly bus pass was about 60. I have a big appetite, but my monthly grocery cost was not that much. A lot of time I had to throw away vegetables because they went bad in the refrigerator. You may ask what about books. Well, I used university library all the time. I can get books through interlibrary loan even if my school library did not have certain books I wanted. As a graduate students, our departments often allow us to print and scan for free in the department, so that saved some money too.

          As you can see from the numbers above, I tried to save about $500 each month. The problem was, we only had stipend for nine months during the semester. That meant there was stable income during summer breaks. I was lucky to get some grants to cover my most summer expenses so I did not have to tap my savings. That meant I could save $4,500 a year. For five years that was a total of $22,500. This was the money that helped me to pay the down payment for a house.

          If you ever checked on house prices, you may know that in order to get a mortgage, one needs to pay a 20% down payment, with my saving of $22, 500, that meant I could only get a house priced at $112, 500 or so. In many parts of US, one can get a decent single family home with $112, 500. However, in the place where I worked, it was very difficult to get an ok house with this price, so I was forced to get a more expense one. That meant my saving was not enough to meet the 20% rule. That was why I ended up taking a more expensive house, but had to pay Private Mortgage Insurance (PMI) until the loan to value ratio reaches 80%. My strategy was to pay extra mortgage principle each month during the first two years or so, since now I had much higher income. The goal was to remove the PMI as soon as possible.

          With the gradual recovery of the housing market and the increasing prices of houses at where I worked, the value of the house I purchased was increasing steadily. Even though I had to pay PMI, it was still a good idea to buy it.

          I hope my story is helpful to those who are not making much money currently, but want to buy a house or a car in the near future. I want you to know that this is really about what you want and the choices you make in your life. You do not have to follow others’ steps. You should get a plan that works for YOU. In my case, I was comfortable living with roommate so I did not see it as a torture to myself. So I was saving happily. If taking certain measure in order to save money will make you unhappy, then it does not worth it. I do not want to act like a motivation speaker and ask you to do whatever possible to save. I like modesty. After all, life is short, you never know what will happen tomorrow. What is the point of sacrificing your living standard in order to save money, and the next day, there is a car accident… So find what works best for you, and gradually achieve your financial goals.